Later life lending platform Air is urging advisers and the regulator to focus on the Consumer Duty challenge posed by the inclusion of unused pension funds in estates.
From the start of the 2027/28 tax year most unused pension funds will form part of an estate for inheritance tax purposes, ending the current IHT-free status of most defined contribution pension funds.
Government estimates suggest that around 10,500 estates will become liable for IHT in 2027/28 as a direct result of the changes, with a further 38,500 estates paying higher IHT bills. The new policy is expected to raise an additional £3.44 billion IHT over the first three years.
Air has warned that advisers and the regulator need to strengthen their focus on tax efficiency as part of delivering good customer outcomes under Consumer Duty regulations, amid concerns that advisers will focus purely on pensions and not consider the role that property wealth can play in retirement planning.
Will Hale, CEO of Key Advice and Air, said: “The inclusion of unused pensions in estates is a major change which creates more complexity on how to prioritise the use of assets in retirement.
“For advisers and the regulator it creates a Consumer Duty challenge making it even more important that later life customers are able to access holistic advice that includes consideration of all options including later life lending. The concern is that advisers will stick purely to their silos and not look at other options or engage with specialist referral partners.”
According to Air, modern equity release products offer a more flexible way to access property wealth for gifting to family and to support retirement lifestyles in a tax-efficient way. Gifting from unlocked housing wealth will reduce a client’s IHT liability if the donor survives seven years.
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